Salon Media Group Announces Recapitalization Results

March 05, 2013 08:05 PM Eastern Standard Time

SAN FRANCISCO--(BUSINESS WIRE)--Salon Media Group, Inc. (OTCQB: SLNM.PK) announced today that on March
1, 2013, it completed a recapitalization in which all of its convertible
notes, related party advances and certain accrued consulting fees
(aggregating $15,651,000, including interest on the convertible notes
through February 28, 2013) and substantially all shares of its
convertible preferred stock were exchanged for an aggregate of 72.87
million shares of common stock at a price of $0.35 per share.

“We are very pleased with our recapitalization efforts. Our strengthened
balance sheet will allow us to move forward with improved confidence,”
said Cynthia Jeffers, Chief Executive Officer of Salon.

The Company currently has 30 million shares of common stock authorized
and at December 31, 2012 had approximately 3.28 million shares
outstanding. On March 1, 2013, the Company issued an aggregate of
approximately 26.29 million shares of common stock for all the preferred
stock participating in the recapitalization held by non-affiliates of
the Company, for all of its convertible notes and for 25% of its related
party advances (including the accrued consulting fees). The amount of
shares represented substantially all of the available authorized common
stock. The holders of the remaining related party advances and preferred
stock participating in the recapitalization, all of whom are members of
the board of directors or their affiliates, tendered these obligations
in exchange for an aggregate of approximately 46.58 million shares of
common stock that will be issued and delivered to them upon approval of
the increase in the authorized common stock of the Company. The board of
directors of the Company has authorized an increase in authorized common
stock to 150 million and will seek approval of the increase at a special
meeting of the stockholders that the Company expects to hold in April.
Holders of a majority of the voting power of the Company have agreed to
vote their shares in favor of the stock increase so the Company will not
solicit proxies for the special meeting. The Company will issue the
balance of approximately 46.58 million shares to be issued in the
recapitalization promptly following the special meeting.

Set forth below is Salon’s capitalization at December 31, 2012 and as
adjusted to reflect: (i) additional related party advances between
January 1, 2013 and February 28, 2013, (ii) the accrual of interest on
the outstanding convertible notes between January 1, 2013 and February
28, 2013, and (iii) the results of the recapitalization.

SALON MEDIA GROUP, INC.

(in thousands, except share and par value amounts)

December 31, 2012

Actual (1)

As Adjusted

(Unaudited)

(Unaudited)

Cash and cash equivalents

$

205

$

718

(2

)

Liabilities and Stockholders' Deficit

Current liabilities:

Short-term borrowings

$

1,000

$

1,000

Related party advances

11,475

-

(2

)

Convertible notes payable

3,339

-

Accounts payable and accrued liabilities

1,160

850

(3

)

Deferred revenues

37

37

Total current liabilities

17,011

1,887

Deferred rent

26

26

Total liabilities

17,037

1,913

Commitments and contingencies

Stockholders' Deficit

Preferred stock, $0.001 par value, 5,000,000 shares authorized,
9,404 and 1,075 shares issued and outstanding at December 31, 2012
and as adjusted (liquidation value of $26,744 and $5,604 at
December 31, 2012 and as adjusted)

-

-

(4

)

Common stock, $0.001 par value, 30,000,000 and 150,000,000 shares
authorized, 3,282,576 and 76,157,944 shares issued and outstanding
at December 31, 2012 and as adjusted

3

76

(5

)

Additional paid-in capital

99,883

115,460

Accumulated deficit

(115,527

)

(115,540

)

(6

)

Total stockholders' deficit

(15,641

)

(4

)

Total liabilities and stockholders' deficit

$

1,396

$

1,909

____________________

(1) The Actual column is derived from the Company’s balance sheet
at December 31, 2012 (unaudited) included in its Form 10-Q for the
quarterly period ended December 31, 2012 filed with the Securities
and Exchange Commission on February 14, 2013.

(2) Between January 1, 2013 and February 28, 2013, the Company
incurred an additional $513 in related party advances, resulting
in total related party advances exchanged of $11,988.

(3) Inclusive of $158 in accrued consulting fees, $152 in accrued
interest on convertible notes and $13 in additional interest accrued
from January 1, 2013 through February 28, 2013, all of which were
exchanged.

(4) As adjusted preferred shares issued and outstanding of 1,075
shares are all Series C.

(5) As adjusted authorized shares assumes additional shares are
authorized at a special meeting of stockholders called for April
2013.

(6) Inclusive of $13 in additional interest on convertible notes
accrued from January 1, 2013 through February 28, 2013.

About Salon Media Group

Salon Media Group (OTCQB: SLNM.PK) operates the pioneering,
award-winning news site, Salon.com. Salon.com covers breaking news,
politics, culture, technology and entertainment through investigative
reporting, fearless commentary and criticism, and provocative personal
essays. Salon.com has been a leader in online media since the dawn of
the digital age and has bureaus in San Francisco and New York City.

Forward Looking Statements

This press release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended, that are
made as of the date of this press release based upon our current
expectations. All statements, other than statements of historical fact,
including, but not limited to, statements regarding our plans,
objectives, expectations, intentions, capitalization and financing,
constitute “forward-looking statements.” The words “may,” “will,”
“expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,”
“potential” or “continue” and similar types of expressions identify such
statements, although not all forward-looking statements contain these
identifying words. These forward-looking statements involve known and
unknown risks, uncertainties and other factors that may cause the actual
results to differ materially from any future results, performance or
achievements expressed or implied by such forward-looking statements.
Important factors that could cause such differences include, but are not
limited to:

We have historically lacked significant revenues and have a history of
losses

Our cash flows may not meet expectations

Our reliance on related parties for significant investment capital

Our principal stockholders can exercise a controlling influence over
our business affairs and may make business decisions with which
non-principal stockholders disagree and may affect the value of their
investment

Our dependence on advertising sales for significant revenues

The introduction of new websites, services or products by us or by our
competitors

Controversial content on our website

Our inability to promote the Salon brand to attract and retain users,
advertisers and strategic partners

Our technology development efforts may not be successful in improving
the functionality of our network

Our operating results are volatile and may adversely affect our common
stock price

Future sales of significant number of shares of our common stock by
principal stockholders could cause the stock price to decline

Our stock has been and will likely continue to be subjected to
substantial price and volume fluctuations due to a number of factors,
many of which will be beyond our control and may prevent stockholders
from reselling our common stock at a profit

Holders of the remaining outstanding shares of Series C Preferred
Stock are entitled to potentially significant liquidation preferences
with respect to Salon’s assets over common stockholders if Salon were
to liquidate

This press release should be read in conjunction with our quarterly
report on Form 10-Q filed on February 14, 2013, including the “Risk
Factors” set forth in the report, and our other reports currently on
file with the Securities and Exchange Commission, which contain more
detailed discussion of risks and uncertainties that may affect future
results. We do not undertake to update any forward-looking statements
unless otherwise required by law.